What is a Cooperative Housing Society?
In our everyday life, we come across a range of housing entities that take the structural form of buildings, independent bungalows, row houses, and others. These structures are represented by a variety of legal identities such as apartment complexes, condominiums, resident associations, cooperative societies, and so on. Each of these is further governed and managed by a different set of rules according to their distinctive legal identity.
In this article, we will jump into the details of one such legal entity – a Cooperative Housing Society by covering the following –
What is a Cooperative Housing Society (CHS)?
A Cooperative Housing Society is a membership-based legal entity that rents or owns real estate and consists of one or more residential buildings that are primarily member-managed.
It is often abbreviated as CHS. This distinctive form of home ownership is an efficient model due to its inherent quality of pooling member resources and is hence termed a cooperative. It works to combine and leverage the buying power of all its members. This, in turn, reduces the overall cost per member for all products and services needed to maintain the housing unit.
In essence, a cooperative housing society is a democratic model of home ownership.
What are the most common types of cooperative housing societies?
While collective ownership and effort are at the core of a cooperative housing society, various forms of it exist that differ by the materialization process of the society. These types may also have certain differences in their operational regulations.
1. Tenant Ownership Cooperative Housing Society
In this, the society either purchases or leases the land for construction of houses
2. Tenant Co-partnership Cooperative Housing Society
In this, the society purchases the constructed structure and sells individual units
3. House Mortgage Cooperative Housing Society
In this, the society loans money to members for construction of their individual units
What are the core objectives of forming a cooperative housing society?
The objects of a society are the core functions for which the society is registered. The ones outlined for cooperative housing societies are to:
- Ensure the availability and existence of a clear Property Title (depending on the society type, it could mean obtaining conveyance, buying or leasing plot(s), constructing or allotting flats)
- Manage, maintain & govern the society’s property
- Raise funds for accomplishing these core objectives
- Organize social, cultural, or recreational activities to strengthen member bonding
- Educate & Train members in the cooperative domain
- Do everything necessary or expedient for achieving these core objectives
How is a cooperative housing society unique and beneficial?
A cooperative housing society is characterized by the following:
1. Democratic Leadership & Management
A group of people from amongst the resident members are elected as representatives and are tasked with managing the society. This group is called the Managing Committee and is reelected every 5 years via a fair and transparent election. Furthermore, the processes defined for their working ensure complete transparency with all members of the society.
2. Collectively Owned Fund
Each member contributes their share towards the maintenance of the housing structure and common amenities. A fixed portion of this contribution is set aside, on a timely basis, for dedicated uses in the form of Sinking Fund, Reserve Fund, etc. This collectively contributed and owned fund is then used for necessary purposes that benefit the whole community in that housing.
3. Inclusivity and Mutual Cooperation
While the elected managing committee can implement decisions on the smaller day-to-day activities, all major decisions or changes require the involvement and approval of a majority of the resident members. Hence, the decision-making and governance of a cooperative housing society promote inclusivity and mutual support. In order to implement these changes, active member contribution (financial or professional) is crucial.
4. Equality (One Member, One Vote)
Unlike other legal entities, cooperative housing societies have a restriction on how many shares one can own. Additionally, each member is entitled to only one vote no matter the number of shares owned by them. Hence when collective decisions are made, all members are equal and can cast only one vote based on their opinion.
5. Transparency
The working of a cooperative housing society is mandated by a minimum number of meetings that must be conducted within the managing committee as well as with all members. Thus, the details of ongoing work are openly discussed in these meetings in line with their purpose. Moreover, all physical records of the society are open to all its registered members for reference and inspection.
6. Stable Governance
The cooperative housing society stands as a separate legal entity and is not affected by the death, insolvency, lunacy, or permanent incapacity of any of its members. Once registered, most societies continue to exist for a long period of time.
7. Service above Profit
A cooperative housing society is registered as a non-profit legal entity and hence doesn’t function with a profit-driven motive. The main goal of the society is the well-being and convenience of its members.
8. Limited Liability
The liability of a member towards the society is only limited to the capital contributed by them. They don’t hold any personal liability toward society’s debt.
9. Government Support
Cooperative Housing Societies receive government support in the form of schemes as well as favorable governing guidelines. Various state-level and central-level plans are devised for assisting societies with loans or land development. The laws are continually amended to better suit the mass market of societies, i.e. small and medium housing societies.
How to register a cooperative housing society?
According to the society type, the procedure and essential documents for registration differ slightly. Primarily, a minimum of 10 members are essential to start the registration process.
- The first phase starts with an informal meeting to decide the key details for society registration.
- The next phase is to confirm the chosen society name’s availability and to reserve it if available.
- The final step encompasses an application combined with all necessary documents as per the society type to be registered.
How to become a member of a cooperative housing society?
The most important and involved members in a cooperative housing society are the ones who own shares in the society and occupy unit(s). This membership is society’s pivotal membership and the member is addressed as a Primary Member.
Other different types of membership such as joint, associate, nominal, provisional, and such are defined for a dedicated purpose. Application to attain any of these memberships must be made to the managing committee along with the necessary documents. The committee will either grant or decline membership after ensuring compliance with set norms.
